This morning the Department of Treasury and the Federal Reserve announced the launch of the Term Assert-Backed Securities Loan Facility (TALF), including revised Terms and Frequently Asked Questions. The announcement follows in line with the Financial Stability Plan unveiled by Treasury Secretary Geithner last month. The creation of the TALF was announced last November, and the Federal Reserve issued revised guidance on the program in December and most recently last month.
The Federal Reserve Bank of New York will lend up to $200 billion to eligible owners of certain AAA-rated ABS backed by newly and recently originated auto loans, credit card loans, student loans, and SBA-guaranteed small business loans. Subscriptions for the first round of TALF loans will be accepted on March 17, 2009, with funding to occur on March 25, 2009. Additional asset classes, such as commercial and residential mortgage loans, are currently being considered for future fundings, creating the possibility for the program’s expansion to up to $1 trillion. The Federal Reserve and Treasury anticipate that the TALF will provide “monthly fundings through December 2009” although it remains in the Federal Reserve’s discretion to extend the term of facility.
Among the more significant of the revisions contained in today's announcement was the decision to drop all restrictions on executive compensation for officers of ABS-sponsoring organizations, which restrictions had been contained in previously issued guidance. In addition, the Federal Reserve reduced the interest rates and collateral haircuts for loans secured by ABS backed by loans or pools guaranteed by the Small Business Administration or backed by government-guaranteed student loans.
Treasury also issued a white paper describing on-going efforts and initiatives to “[a]dress securitization markets and increase lending.”